What is the LifeCycle Endowment?
The LifeCycle Endowment is an investment-linked policy underwritten by 27four Life Limited. The endowment assists you in saving towards your long term goals. It supports disciplined investing but at the same time allows you flexibility to change the investment particulars. If you are comfortable with a minimum five-year investment term, want a tax-ecient way to save, and wish to create liquidity in your estate, our Endowment Policy may meet your needs. You may also structure your portfolio across multiple policies to give you additional liquidity during the 5 year restricted period.
- Offers you a tax-efficient way to save
- Allows you to create liquidity in your estate – your beneficiaries may be paid out straight away on your death instead of the investment being included in your estate when you die (and potentially held up by any delays in finalising the estate)
- Enables your beneficiaries to save on executor fees
- Offers you transparent and easy access to a range of asset managers and investment portfolios of your choice.
An endowment policy is legally required to have a minimum five-year term (also referred to as a restriction period as it restricts the withdrawals you may make from the policy). This applies to:
- The first five years of the policy, or
- Five years from the first day of any month during which the ‘120% rule’ takes effect (see below)
The 120% rule takes effect when your contributions in any policy year are greater than 120% of the higher of any of the previous two policy year’s total contributions. The Life Company will accept these contributions into the same policy and extend the restriction period (if you are already in a restriction period) or start a new five year restriction period on the entire policy.
Why, How Much and How?
Can I access my money?
Legislation provides that during any restriction period, you may make one withdrawal.
The maximum amount you may withdraw is the lesser of:
- your contributions during the restriction period, including any market value in the policy
the day before the restriction period started plus 5% compound interest; or
- the market value of the investment account less fees and charges
Any remaining balance (more than R2 500) must stay invested until the restriction period ends.
If the policy is not in a restriction period:
- You may withdraw part or all of the value of the policy, which is the market value in the investment
account less fees and charges, and/or
- You may also schedule regular withdrawals from the LifeCycle Endowment
Can I use the policy for etc.?
Can the policy be used as security?
Your investment may be ceded as a security or an outright cession.
Can I make a loan on the policy?
You may not take a loan from your LifeCycle Endowment Policy. You are only allowed to make one surrender within your restriction period.
Can I transfer this policy to another
You may not transfer this investment to another endowment policy or transfer another endowment policy into the LifeCycle Endowment Policy.
What is the tax treatment?
In terms of income tax legislation the administrator is required to pay income tax and capital gains tax (CGT) at a rate which depends on how you are classified. For this purpose, you are classified as either a natural person, company, or an untaxed policyholder. Trusts are taxed according to the classification of the beneficiary.
Income tax is incurred and recovered from the policy when income are received. The Administrator pay tax on any capital gains that may arise.
This means that on the sale of units to pay a benefit from the policy, the benefit may be reduced by a provision for CGT.
Any sale of units to pay fees or charges or a sale of units to effect a switch from one unit trust to another may create a CGT liability which will be recovered from the policy benefit when it is paid out.
Who can invest and what tax rates apply:
Any natural person, registered company, trust and non taxpaying organisation may invest in the LifeCycle Endowment Policy.
What is it going to cost me?
You will pay an on-going administration fee which depends on the size of your investment.
All fees are quoted as a percentage of assets under management on an annual basis:
The on-going administration fee includes all the costs apart from the expenses associated with the management of the investments. The investment management costs are shown in the “Investment Options” brochure in the Total Expense Ratio column.
D and D the Cycle (the Administrator) does not charge initial fees when you purchase an endowment or switching fees should you decide to switch your underlying investment options.
What happens when I die?
At the commencement of your policy, you must nominate a life assured and a beneficiary for ownership/beneficiary for proceeds. If you are not the last life assured, the policy will not come to an end due to your death. Ownership of the policy will pass to the nominated beneficiary for ownership.
The policy comes to an end when the last life assured dies. The proceeds will be paid directly to the beneficiary for proceeds.
The policy is issued on the life of this person and comes to an end when this person dies. If there is more than one life assured the policy will end when the last life assured dies.
Beneficiary for ownership
If the policyholder and the life assured is not the same person, or if there is more than one life assured, you may nominate a beneficiary for ownership to become the owner of the policy after your death.
This only applies if the policyholder is a natural person. If there is more than one policyholder, each policyholder may nominate only one beneficiary for ownership.
Beneficiary for proceeds
If the policyholder is a natural person, and is the only life assured, you may nominate a beneficiary for proceeds to receive the proceeds of the policy after your death.
What do I need to get started?
- Complete the LifeCycle Endowment application form
- If you are an individual, compile the following supporting documentation (If a Legal Entity, please refer to the Application form for a list of documents to compile):
- ID document containing a photo, full names, date of birth and ID number, valid passport or a valid driver’s license
- A document less than 3 months old containing residential address that is a utility bill, bank statement, rates account or tax invoice
- Proof of banking details
- Send the completed application form and supporting documentation to D and D the Cycle(Pty)Ltd: email@example.com
What happens after I sign up?
- A transaction confirmation statement and a policy document
- Provide you with online access
- Regular benefit statements